Like We Need Advice From Chavez
by Big Dog on Sep 29, 2008 at 06:15 Political
Blowhard Hugo Chavez says that Capitalism ruined the US and that we need to scrap the Constitution and write a new one. He claims that America needs to do so that we can shout Liberty again in the US.
The last thing we need is a tin horn crack pot telling us what to do. As for liberty, his country does not know what liberty is and they never will. His view of the world is Socialism which has failed in every country where it was tried.
Capitalism is not the reason that we had down turns in the market. Over regulation by government and stupid rules that forced banks to lend money to people who could not afford it, were not credit worthy, and had no business borrowing it led to the problems. The video in my sidebar spells it out clearly.
The people who are shouting about regulation and government oversight are the very ones who failed to see this coming. The Bush administration warned at least 17 times that the market and taxpayers were at risk because of the risky practices of Fannie and Freddie. Democrats, whose friends held top spots in those entities, stonewalled and said all was well.
They got rich and American taxpayers got screwed.
As for our Constitution, it is fine. We need to try following it and things will go well. Chavez has no say in the matter and as far as I am concerned he can go straight to hell and the sooner, the better.
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Economists aren’t in agreement that CRA had any major fault in the crisis. Nobody wants to misstate it as a factor but to list it as the reason for the crisis I believe is without merit.
It looks to me like many facts about CRA tend to point away from the idea you keep pushing. The worst offenders of idiotic lending were those independent mortgage companies outside the reach of CRA:
At a panel discussion I attended on the crisis they talked about the thinking of those responsible for some of the bad lending. It was not a matter of greed, it was just a massive failure to invest with adequate capitol to back it up and they had made huge bets on the housing bubble…
Adam that “report” is from February 13,2008 and is basically a spin piece supporting the CRA if you actually look at what he cites for his sources most of them date back to the 1990s, I think there are literally 2 resources that date to 2007. The rest are 4 years old or more.
Also in your quote you forget to include what directly follows, “Although reasonable people can disagree about how to interpret the evidence, my own judgment is that the worst and most widespread abuses occurred in the institutions with the least federal oversight.” Which means that is his OPINION and not fact. Also what qualifies as “comprehensive federal supervision”, since many banks buy the mortgages from these brokers you’d think that there would have to be some reasonable guidelines that they would have to follow.
What you quote that I left out is basically how I started my comment. Economists aren’t in agreement that CRA had any major fault in the crisis. That being said I offered the quote as a counter opinion to the way that Big Dog and others blame CRA without citing real evidence.
Again, I don’t claim that CRA was not a factor but I’m not seeing any real evidence so far that it was THE cause or even a major cause of the crisis yet I’m seeing plenty of evidence that says otherwise.
I was hoping you’d give me a little more evidence to suggest I’m wrong than saying something like “His citations are out of date.” I’d like to see some decent arguments that CRA is responsible if you got a moment because I haven’t been able to track them down yet.
Just because independent companies were not bound by the CRA does not mean they did not use it as a reason to justify bad loans. The meltdown is the result of people getting loans they could not afford on the assumption they could sell their houses for profit. When that bubble burst people were left holding the bag.
Also, how many of those loans were subsequently held by Freddie or Fannie? These 2 GSEs hold over 5 trillion dollars in mortgages (more than half the market). They had debt ratios of 80:1.
This has been debated and Walter Williams pointed it out in May 2008. The fact is, a huge number of people were able to extend their credit well beyond their means.
Spin all they want, the Democrats were warned about this and they failed to act and stated all was well.
There are certainly other facets to the meltdown but the major one is the fact that the law required lending institutions to lend money to people who could not afford it. Every analysis I have read cites that as the major factor.
Over regulation causes problems (once again pointed out by Williams) and to say that it was because of areas not regulated is bunk. What good do regulations do if the people in Congress who are supposed to enforce them are taking money from the companies and ignoring warning signs of impending doom?
Over 5 TRILLION dollars. That is the bulk of the problem. Allowing people to bundle bad loans and sell them off hurt even more. If they would not have played the race card or minority or poor cards then we would not have this problem. Allowing people to borrow more than they can afford is a recipe for disaster and this disaster has the fingerprints of the Democrats all over it.
Just watch the video.
Williams from January
Williams from May
Nobody disputes it was bad lending and Fannie and Freddie at the root of the trouble so that doesn’t need to be restated over and over. I just still take issue with listing CRA as a major factor.
“Just because independent companies were not bound by the CRA does not mean they did not use it as a reason to justify bad loans.”
That reasoning is about as faulty as it gets. Neither of the articles you list really talk about CRA as a major cause or offer facts at all about CRA. Several things I’ve seen point to a drop in irresponsible lending with CRA is many parts of the country so I’m unclear as to why CRA gets the blame.
It’s like when in the middle of railing against failed regulation CRA is tossed into the conversation because it’s a form of regulation despite the fact that CRA seems to have very little to do with the crisis and by several accounts actually achieved what it sought to achieve without negative side affects…
Well, the bailout is toast. I’m not sure if I support the bailout or not but I suppose the truth is I’m not qualified to say for sure. I keep trying to get my wife to keep me updated and informed but this stuff is way over my head…
Toast? Maybe not. They will try to repackage it. Pelosi ruined it by running her yap. There is good and bad to either approach. Like you, I am no economist and even they do not agree but I don’t want taxpayer money bailing out millionaires.
They should have listened to Ron Paul.
When you force banks to lend to people who cannot afford it you will have problems.
CRA forced banks to lend to people who could not afford it. It is a bad regulation and based solely on race and not means.
Some would argue that CRA didn’t just force them to lend to minorities, but simply prevented the red-lining practices that kept loans from being given to areas with heavy minority populations. Were there plenty of no-doc and liar loans created because of CRA? Sure. But there is some evidence to suggest that these loans from CRA performed better than normal loans so again I’m still not seeing evidence that suggests the CRA connection to the crisis.
Let me be clear though again. I’m not arguing as if I’m 100% correct because this is a very foreign subject to me. But an awful lot of people are saying bad things about CRA but offering no real evidence to back up those claims. You got anything?
Well, economics is not my area of expertise so I can only go on what the economists have said. Many are pointing to CRA as a true problem and while it was not the only problem it was a huge precipitating factor.
CRA got rid of redlining, all well and good but it went one step further as the audit by Cuomo only focused on the race of denied applicants rather than the reason they were denied. The loans denied were because of inability to pay or people bot being credit worthy.
Here Adam, from Reason:
At the same time, Fannie Mae and Freddie Mac were going through a crisis. In 2003 and 2004, an accounting scandal was revealed. The two public-private partnerships were cooking the books to show phantom profits. The Bush administration and its allies on the Hill pushed a strong bill to reform how these institutions operated. The measure came very close to passing, but Fannie and Freddie cut a deal. They would refocus on expanding mortgages for low-income borrowers if the feds kept out of their operations. The bargain worked. Virtually all the Democrats and a few Republicans backed the two companies and the reform effort failed.
Fannie and Freddie then went on a subprime bender. They made it clear that they wanted to buy all the subprime or Alt-A mortgages that they could find, eventually acquiring around $1 trillion of the paper. The market responded. In 2003 subprime mortgages made up less than 8 percent of all mortgages. By 2006, they were over 20 percent. Banks knew they could sell subprime products to Fannie and Freddie. Investments banks realized that if they laced ever increasing amounts of subprime mortgages into the MBSes, they could juice the returns and so earn bigger fees. The rating agencies, thinking they were simply dealing with traditional mortgages, didn’t look under the hood.
The article also makes the argument that the economy is fundmentally sound and that this is a Wall Street crisis, not a national economic crisis. The numbers come nowhere close to 1929 Depression numbers.